Buying Software – Secrets they don’t want you to know: The “guarantee”

I’ve been in application solutions for manufacturing since the 1970′s.  I’ve sold mainframes; I’ve defined packages for sale on Minicomputers; I’ve been in marketing and support; and I’ve spent years working alongside customers installing and supporting MES systems.

It really irks me when I see an otherwise very intelligent customer get bamboozled by marketing hype, and spend millions of dollars on the wrong solution!  So I am breaking with the magicians’ union (so to speak) and will share with you over the next several blog posts some of the secrets that, once you know, can help you make better decisions on software solutions.

I will share with you strategies and anecdotes that may help you in your decision process.

Certainly if you are dealing with a smaller company, you are important to them.   I can tell you that every customer that QIC supplies is important to us.  Our large multi-plant implementations are extremely important to us.  Our single plant, single line customers are just as important. If we guarantee something, we will make good.  We can’t afford to lose the customer, or go to court.

But when you are dealing with a huge vendor, the same is not necessarily true.  If you have invested millions of dollars and years of employee time in a new ERP system, are you really going to sue the huge multinational software vendor that guaranteed it would work?  They have deeper pockets, specialized software savvy lawyers, and probably have covered themselves 10 ways in the various correspondence and contracts.  And you have a business to run, and a disaster to recover from.  Unless you are hooked on the principle, you will back off and lick your wounds.

I have heard so many stories about software purchases, ranging from misleading information to outright lies and impossible guarantees.  And it happens to everyone.  When we upgraded our CRM software, we upgraded from a package we had been using successfully for 10 years.  We upgraded to get 4 new features that were crucial to us.  We were guaranteed these features worked great.

What happened?  The features were there, but didn’t work properly.  We paid the support fees because the next release was going to fix the problems.  We stopped paying for support when the 4 calls we made about these problems were still open issues years later!  Now, almost 10 years later, apparently the next release fixes two of the issues.  We are changing to another CRM that has the functionality.  We went from a huge supporter of the software to its biggest detractor… but that doesn’t help us with the solution.

Unfortunately, some salespeople lie. In our experience, the leaders in software seem to be “fact challenged” more than many of their competitors.  Maybe this is how they got big? Or maybe it is because the salesperson at the huge software company does not have the intimate product knowledge found in a smaller company.

Is there a solution?  Sure, and ths is how you can reduce the risk.   You need to know your supplier and trust them to have your best interests at heart.  Deal with salespeople who will still be there AFTER the sale, and not fob you off on “a team of specialists” (which is a euphemism for “got your money, goodbye”).  Look for answers like “I don’t know, but I will find out for you”;  “what do you mean by….” ;  and “there are a couple of ways we can address that”, and “No, I am sorry we don’t do that”.   These all indicate that the salesperson knows your issue, knows her product, and wants to be sure that her information is correct.   The most dangerous words you can hear are “Sure, no problem”….  “that is coming in the next release”….

Or my favourite from a software demo given to a candy company “pretend your candies are car parts…..”

“Best of Breed”… or “total solution”

This is an old discussion, but seems to have resonance recently.

There is a school of thought, espoused largely by ERP vendors, suggesting that organizations should have a single all-encompassing solution for everything that ails them.  Other words used to describe this approach are:  Sole source; single system; enterprise; extended ERP; comprehensive; one stop shop.

Contrary to what they would have you believe, ERP is NOT the panacea – in fact it can be a black hole as the US Air Force has discovered, cancelling an ERP rollout that started 10 years and over $1,000,000,000 ago, with an estimate of another billion before any return was expected:

http://www.computerworld.com.au/article/442099/air_force_scraps_massive_erp_project_after_racking_up_1_billion_costs/

ERP vendors seem to think that the inventory, billing and accounting is the hard part.  All the operational, supply chain, engineering, performance monitoring, and compliance stuff is simple.     I beg to differ – accounting has rules that are understood worldwide, whereas operational systems tend to have no right answer, are innovative, and differ from organization to organization. Operational system users are not usually as computer-savy as ERP users tend to be.  ERP vendors foster the belief that if one can provide “software for manufacturers”, that means every conceivable aspect of software for manufacturers – ERP, MES, MOM, LIMS, PLM, CAD, CAM, SCADA, EDI, Warehouse Management, CRM….  As if each is not an island of expertise!

There is a competing school that suggests that an organization should obtain the best solution for a particular problem, and, if necessary, integrate any solutions that might result in duplication of data.  This is called “Best-of-Breed”, and until recent marketing pushes by the ERP community, was the acknowledged preferred approach.

Incidentally, many of the same vendors who trash the best-of-breed approach are often selling solutions that are actually a mishmash of apps bought/acquired from multiple companies and cobbled together into an “total solution”.  Except for the vendor’s name on the box, this is no different than a best-of-breed solution (except that perhaps each module does not represent the “best”, just an “also ran”).  The vendor is the integrator – you just don’t know it…. until later.

So which approach is right?

As usual, the answer is “it depends”.  Marketing is so very prevalent in software solutions today, that I do not envy you the decision.  Typically I find an inverse relationship between best marketer and best system.  [Every dollar spent on marketing is not spent on development and support]  I have seen solutions purporting to be “SPC” that are comprehensive systems, overkill in fact… I have also seen “SPC” systems that are nothing more than a single run chart! (Surprisingly the single run chart was the most expensive – because it was part of a very expensive ERP system)  I have seen incredibly intuitive plant scheduling systems that automatically optimize schedules in near real-time based on sophisticated algorithms… or cumbersome scheduling systems that are really nothing more than a “to do list”.   (Again, the latter being far more expensive!)

If you need a formal sedan to escort clients, and a 20 foot cube van to deliver products, do you get:

  1. A basic SUV (the comprehensive solution) that may not have quite enough room to handle the deliveries optimally and be much less luxurious for the clients; (jack of all trades) or
  2. A luxury SUV that will provide luxury for clients but have the same cargo constraints at a premium price (not to mention the leather will be destroyed by packing product in); (expensive jack-of-all-trades) or
  3. A luxury sedan with towing package and a cube trailer (the integrated best-of-breed approach which answers both requirements completely); or
  4. A luxury sedan AND a cube van with a communication system (the ultimate best-of-breed:  integration as necessary; twice the transportation capability; lower price than the luxury SUV)

All are viable solutions!  In this scenario, I would probably go with option 4, or 3 if cost was a major constraint, all other things being equal.

Surprisingly, the approach is often more a function of who is making the decision.  If the actual end-user decides, best-of-breed will almost always be the result.  If someone removed from the actual need makes the decision, often the “comprehensive solution” will be chosen.

Why?  Simple.  As Marc Cuban says “it is always the little decisions that have the biggest impact”.  The end user knows the subtleties of what is needed.  In a recipe management system there are many capabilities that can make one system orders of magnitude better – little things obvious to R&D, but that the “big picture person” cannot comprehend: to her, simply having a Bill of Materials is sufficient, isn’t it?  That is, after all, the recipe. Even though as a “recipe management solution” this has no ROI to the R&D user, it does provide a single user interface.  Like buying a sports car with a trailer hitch to make deliveries… a vehicle with no towing capacity that would be destroyed by towing anything substantial.  But hey, it has a trailer hitch so it meets the need.

I have seen organizations acquire document management systems in order to do recipe management.  True, one can build a formula system in a document control / workflow system; one can build a cube on the back of a sports car too – but why not just buy a cube van?

Unfortunately the comprehensive alternative is usually extremely expensive, especially in terms of opportunity cost.  It often takes 2-5 years to find out that the dream being sold by the ERP vendor is not reality.  I have clients who bought SAP almost 2 years ago and are still waiting to run their first invoice that was supposed to be a year ago… yet they still believe that SAP can meet all of their MES needs (or will in the “Next Release”).   Are not the Emperor’s clothes magnificent?  Conversely, many of our SPC, MES, and scheduling users are SAP (and other ERP) users who tried and failed.

Proponents of “sole source” cite the following advantages: (borrowed from various web sites)

  • A single development vision for all ERP, manufacturing, MES, and Supply Chain requirements
  • Single point of contact for all technical support
  • One set of tables in a database with transactions updated instantly throughout the entire system, in real-time.
  • Single maintenance agreement, one development team, consistent user interface
  • Lower overall cost of investment, lower maintenance costs, Quicker ROI

And to restate as negatives to best of breed:   

Eliminate Hidden Costs of Third Party (“best of breed”) MES and ERP Integration

  • Higher implementation costs associated with the “integration” of the disparate systems
  • Time delay when transferring data between applications and databases
  • Finger pointing when it comes to identifying a system problem
  • Multiple maintenance agreements, multiple points of software support
  • Higher maintenance fees, Incompatible upgrades
  • Multiple databases that create a complex, problematic system architecture
  • Problems and inconsistencies when creating reports across multiple databases
  • Multiple vendors with different business strategies and visions

A pretty compelling argument.  But the reality is that the addition of modules to the vendor’s arsenal is a way to solidify your reliance on that vendor, and to increase his revenue.  Just because one knows about accounting and inventory doesn’t mean he knows quality management and process monitoring.  No one can be a master of all trades – best case would be jack of all trades.

Best-of-breed may be less expensive (from both a licensing and support perspective) and almost certainly will be more robust.  If properly integrated, there should be no problems with upgrades to either system – any system that regularly restructures the database tables is not a system you want anyway.  While it may be true that here is a possibility of finger-pointing by the respective vendor support people, a good support person wants to solve the problem, regardless of whether it is her system that actually caused it.  Besides, your support comes from the integrator who supplied all of the modules – to you this is a single application.   A large portion of system problems are with the underlying Microsoft or other vendor code anyway.

From a “common user interface” perspective, about 90% of the rules surrounding user interface design are dictated by Microsoft.  Is it difficult to navigate web pages on different sites?  Navigating different applications is no more difficult.

Last but not least, one of the biggest risks is to bite off more than you can chew.  Separate teams implementing best-of-breed solutions each have a good probability of success; but one team trying to balance ten or more modules of a single solution is easily overwhelmed…  rather than 3 of 10 applications running profitably in a year, the result is nothing running for a number of years.

Finally, having multiple developers with different visions is probably desirable.  Oversimplified, the vision of an ERP vendor is to have a financially sound and controlled system.  Is that the same vision you want for a recall, compliance or quality system?  Certainly cost is a consideration, but perhaps public safety and/or compliance to regulations would be a more important priority for these systems?

This is not to say that one cannot go overboard on Best-of-Breed.  We have clients that have multiple Document Management systems, where one is more than sufficient.  Or have separate LIMS and SPC systems, even though they overlap by about 95%.

So, in summary, if (and only if) your internal specialists find that the applicable module meets or exceeds their needs, consider a single vendor solution.  Your needs may not be that complicated.  But don’t be afraid to get the best solution for each need you have – integrating them is not near as difficult as the sole source vendors threaten.  If you have a good systems integrator, it should not be evident that there are multiple applications involved.  

It appears that the expectations of the market agree with me.  In its review of trends going into 2013, Panorama Consulting suggests: “Best-of-breed solutions will continue to chip away at single-system ERP software. With more companies moving away from big, single-system ERP deployments, there will be a continuing opportunity for niche and best-of-breed ERP systems to capture market share in 2013. Vendors… with their best-of-breed solution focus, will be better positioned to respond to customer demand of this type.  http://panorama-consulting.com/top-ten-predictions-for-the-global-erp-industry-in-2013/

It is so gratifying when other experts agree with you, isn’t it!

Safe Foods for Canadians

This is the second in our summary of the new Canadian Food legislation.

Here we will address one of the stated reasons for the passing of the Act.  From the CFIA’s (Canadian Food Inspection Agency) summary of the Act:

“Strengthened food traceability:  Current legislation does not require food manufacturers and other regulated parties to have traceability systems.  The legislation provides the CFIA with strengthened authorities to develop regulations related to tracing and recalling food, and the appropriate tools to take action on potentially unsafe food commodities.  This includes a prohibition against selling food commodities that have been recalled.”

Boy have we come a long way.  Not so long ago, MS Word would tell me that “traceability” was not a word (back when we were talking about it as a neat feature of our SPC systems.)  No longer!  Now we offer complete systems for traceability, not just an extra feature of another solution.

The provisions of the USA Bio-terrorism Act of 2002, USA FSMA, and now Safe Foods for Canadians, all consider traceability to be a major concern.  Not to mention that the big box companies have even more stringent requirements.  Many food companies think they have it nailed, but there are serious holes and issues in most paper based systems.  The first and foremost is of course the possibility of error, transcription, or illegibility.

If you manufacture your own products, under BTA you are allowed a maximum of 24 hours to produce a complete recall list with SKU # and location.   If you co-pack, or ship to the Walmarts and Costcos of this world, you may have less than 4 hours.

In a paper world, production batch sheets are usually sorted by shift and placed in envelopes with supporting documentation.  Although I have met people who swear they can do a mock recall in less than 4 hours purely on paper, I can’t conceive of how they can do so accurately and completely:  It is easy to recall all of production lot 2012076, (it may all have shipped to the same big box warehouse!) but to recall all SKUs that contain or may contain liquid sugar 211093882 that entered the tank on May 15 2013, and the tank hasn’t been cleaned since then – that would be a neat trick.

Even worse: What do you do with this if the recall is for any product delivered by driver John Smith?  Or all products of JS Company delivered between Jan 14 and Jan 19?  And what if somebody dropped the batch sheets into a vat?

Canada isn’t there yet, but between the Safe Foods for Canadians Act, and the CFIA stepping up to provide regulations, I don’t think Canadian food processors have a very long window… and besides, it is just smart business, good manufacturing practice, good corporate citizenship, and limits exposure if you do need to do a recall.  Lack of clear traceability by definition means that a recall can be orders of magnitude larger than it would be with contained traceability.